My 1st Million At 33 – yes, you can do it too

I just received the August edition of Kiplinger’s Personal Finance Magazine.  It’s got 30 stocks/mutual funds for higher dividend yield investments ranging from 4% to 16% yield.  I’m not going to list every symbol here, but just a few that I am more interested.  The rest you can get a copy of Kiplinger’s and read more about them.  Here is the full list by the types of investments from Kiplinger’s:

1. Tanker stocks: ATB, DHT, GSTL, SSW
2. Royalty trusts: CRT, SJT, ERF, BPT
3. Private Equity: A couple of names invested in the mortgage area which I will try to avoid right now, even when they may be in the credit-worthy segment of the market.
4. REIT: I recommend in general against REIT right now.  But I checked the charts for the two recommendations in the magazine, and they seemed to be okay without the shrinking yield phenomenon that I am mostly concerned with.
5. Bank Loan (Floating Rate): Floating rate funds are very good versus bond funds in a rate hiking cycle, because their interest yields go up along with the short term rates.  However, short term rates are almost at the peak right now in my opinion.  And that would also mean that it should be the time to sell your floating rate funds and lock in a bank CD instead, when you are investing in this low risk spectrum.
6. Corporate Bonds:  These are mostly callable after 5 years of issue.  And Bonds are less desirable in an inflationary, interest rate rising environment.  Although the current short term interest rate may soon peak, I believe that long term interest rates (which affects more the actual bond values) may not necessarily go down, and are directly affected by a run in the $US.
7. Blue Chip Stocks: Usually pays out less than 5%, and consists of mostly banking stocks which I recommend against.  Some pharmaceutical names are okay.
8. Municipal Bonds:  Again, I generally hate to invest in bonds in the current investing environment.

So going back to my original list of high yield dividend stocks of upto 18.6%, I still like energy trusts and tanker stocks much better than anything else that pays dividends north of about 7% (roughly the break-even point comparing to a tax-free municipal bond).  The sectors that I will steer clear from are banking, financial, real estate, and mortgage-related stocks, and any kinds of bonds.  In fact, my current portfolio has 0% bond, and it has been almost 0% (except some occasional holdings in short-term, or international bonds) for probably the last two years.

Since I put out my partial list of high yield dividend stocks, many names have gone up quite a lot.  My original table was based on 6/16 data, but since I published on 6/22, I will use 6/22 for calculating the return.

I’m skipping the MLP pipeline partnership, since they are usually so stable that the range from maximum to mininum point may be less than 5% for many months.  NZT is a telecom stock, so it has not risen much.  PWI is a historically weaker performer, and ERF is historically a stronger performer.  This fact is quite clear just from the last few weeks.

By the way, my positions on energy & bonds are actually validated in the next article right after the dividend stocks in Kiplinger’s magazine.  In the next article of an interview on FPA fund manager Bob Rodriguez, he likes energy stocks, and he is not buying long term bonds.  Pretty much summarize majority of my positioning in this market, except on my precious metal invesment.